Contribution break-even chart - meaning

Contribution break-even chart – meaning

This chart helps in ascertaining the amount of contribution at different levels of activity besides the break-even point. In this method, the fixed cost line is drawn parallel to the X-axis. The contribution line is then drawn from the origin, which goes up with the increase in output. The sales line is plotted as usual, but the question of the intersection of the sales line with the cost line does not arise. The contribution line crosses the fixed cost line and the point of intersection is treated as the break-even point. At this point, the contribution is equal to fixed expenses and there is no profit or loss. If the contribution is more than the fixed expenses, profit will arise and if the contribution is less than the fixed expenses, the loss will arise.

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  1. Pingback: Break-even point – meaning and formula – ACCOUNTING CLASS

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